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HSBC Asia spin-out Headland buys Korean toy company YoungToys

7 Dec 2012

Headland Capital, the former Asia private equity arm of UK banking giant HSBC, has bought a 96.5 per cent equity stake in South Korean toy company YoungToys.

YoungToys designs, manufactures and distributes toys in South Korea, with market leadership positions in the car-robot transformer, fashion and big doll market segments.

The company’s major products are the Tobot transformer, and Jouju and Kongsuni dolls for young girls. Financial terms of the deal were not disclosed.

The investment was made through the firm’s Headland Private Equity Fund 6, a $1.34bn vehicle that is now more than 50 per cent invested.

The fund has made two exits and eight investments to date, including serviced offices provider The Executive Centre and Korean bridge bracket maker UET.

Since 1998, Headland has completed 18 investments in South Korea, with $780m deployed primarily in the consumer and industrial manufacturing sectors.

The toy market was attractive because of the projected steady growth rate, the increasingly significant entry barriers and the consolidation trend in favour of the leading players with established brands and relationships with cable TV companies and discount stores, according to Taigon Kim, senior partner, Headland Capital.

The growth of the market in South Korea is expected to be driven by GDP per capita growth and increases in toy spending per child, as spending levels grow from a relatively low base to levels more in line with economically advanced countries, he added.

Headland spun out from HSBC in November 2010, and was the first of five captive private equity units to be hived off by the bank ahead of imminent Basel III and Volcker regulation.

Talks to spin out the units began in June 2010 shortly after the Volcker Rule was proposed, which aims to prevent banks from owning, investing in or sponsoring private equity funds and hedge funds to limit conflicts of interest between banks and their clients.

In September AltAssets reported that Headland has appointed ex managing partner Marcus Thompson as CEO, while former lead managing partner George Raffini will take on a less hands-on role as chairman.

Thompson and Raffini had previously served as joint managing directors of HSBC Private Equity Asia before the firm spun out from its parent company, at which point both executives became joint managing partners of Headland Capital Partners.

The new reshuffle will see Thompson take a leading role in the strategic and operational initiatives of the firm, while Raffini, who has been with the firm since inception 23 years ago and previously led the operation with Thompson’s support, will take on a more strategic, supportive role as chairman.

The Hong Kong-based firm is looking to launch a new fund with a similar target to its predecessor at the beginning of 2014.